January 30, 2013 at 5:54 p.m.
The Cayman Factor / Protecting our business
Bermuda needs to be fast and aggressive
WEDNESDAY, JAN. 11: “We need to be faster, as aggressive and as financially committed as our competitors.”
That’s the view of Cheryl Packwood, CEO of Business Bermuda, who was asked to comment on the potential threat posed by a competitor like the Cayman Islands.
At a Captive Forum conference last month, Caymanian Premier McKeeva Bush announced immigration incentives and a targeted marketing campaign to lure reinsurers to his island. A new legislative framework, 10-year work permits and less red tape for work permit applications were also unveiled.
It’s a strategy “squarely aimed at the reinsurance industry in Bermuda,” according to The Caymanian Compass.
Premier Paula Cox responded in the House of Assembly, listing six key areas in which Bermuda has the edge: infrastructure, human capital, stability, reputation and geography. Industry sources agree that Bermuda is well ahead of the game and some say the ‘threat’ from Cayman is tenuous at best.
But they also stress that Bermuda must stay on its toes to retain its appeal to international business.
“Sure, we have to be cognizant of anyone that says they want business that is based in Bermuda,” Ms Packwood told us.
“Cayman is aggressive and that constitutes a strength. We need to emphasize where their rhetoric does not match reality and where brass plates don’t translate into substance. Bermuda’s different and we are highlighting that.”
“Bermuda has no monopoly over the factors that make for a successful reinsurance jurisdiction,” says Craig Simmons, economics lecturer at Bermuda College.
“What we do have is a first-mover advantage, but this advantage cannot last forever. Once our competitors learn and apply the reinsurance business model and take advantage of our missteps, there is no reason why other jurisdictions cannot challenge or overtake us in this market.”
Economist Bob Stewart said competition is a good thing “because it makes people sharpen up their products so they pay more attention to the consumer.
“One of the problems with Bermuda is it thinks the world owes it a living.”
Clayton Price, chairman of the Insurance Managers Association of Cayman, said you could flip the question of who’s targeting whom for more business.
“Bermuda has recently come on strong in the Special Purpose Vehicles with regard to the security sector. [A Special Purpose Vehicle, sometimes referred to as a Special Purpose Insurer, is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt].
“Bermuda has now surpassed $3 billion in the CAT bond arena on the BSX. I wouldn’t call it sabre rattling but Bermuda is getting into an area that Cayman has pretty well dominated up until recently, when the laws were changed in Bermuda to be more accommodating.
“The paths do cross and the islands are very similar but between the two there is a lot of room where they both can grow. There’s actually a bit of a symbiotic relationship between the two.”
On Monday the Bermuda Monetary Authority reported 23 SPV incorporations for 2011, representing a 50 per cent year-on-year jump in insurance registrations.
Brad Kading, president of the Association of Bermuda Insurers and Reinsurers, said the BMA has been proactive by beefing up legislation to make it more attractive for SPVs to come to Bermuda: “The track record shows there has been an increased number of SPVs licenced to Bermuda over the last couple of years,” he said.
Accordingly, Bob Stewart downplays the Cayman threat. While Cayman “would love to eat Bermuda’s lunch,” it would be “naïve to believe that international business would make a decision based on a marketing team at a conference. It just doesn’t happen that way.
“The last thing businesses pay attention to is the blandishment of a bunch of bureaucrats in Cayman or Bermuda. Businessmen are normally smarter or more astute than politicians or civil servants.”
Ms Packwood, on the other hand, feels strongly that Bermuda needs to do more cheerleading: “We need to invest more money in international business marketing. We have limited budgets and staffs to support our efforts.
“For example, Cayman’s Premier went to China with a delegation of business executives. We’ve been advocating just such a trip for several years and it has not happened yet.
“We need to be faster, as aggressive and as financially committed as our competitors.
“Beyond the one-to-one marketing and the public relations efforts of Business Bermuda, the BII and ABIR, there is no cohesive advertising campaign on television, print or radio in any market of the world.
“The message would be simple: When the world needs someone to solve its insurance problems, it turns to Bermuda. Or possibly, ‘we are the world’s life preserver’. There are many possibilities. We have already committed time and resources to developing such messages and are prepared to go forward with the execution of a similar type message to strengthen and improve our global image.
“A major commitment to building broader awareness of Bermuda’s benefits in coordination with government would go a long way to staving off competition and growing Bermuda’s business around the world.
“Such an effort requires financial commitment and an understanding of building brand awareness and of marketing our jurisdiction, which Bermuda really needs to take on.”
Craig Simmons agrees that we cannot rest on our laurels: “Recognition of the Caymanian threat by the government, commercial and residential landlords, bankers and IT providers will provide an incentive for more competitive behaviour,” he told us. “As a country, we’re beginning to lose sight of the goal: to build an offshore financial centre that provides enough jobs and foreign currency for our people to maintain a standard of living to which we are accustomed.
“If we fail to believe in the Caymanian threat, we may repeat the errors made in the hospitality sector over three decades ago.”
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